TL:DR

For banks and insurers in Saudi Arabia and the GCC, IFRS 18 for banks lands harder than for any corporate, because the “specified main business activities” rules pull net interest income and insurance finance results into operating profit. SOCPA adopted IFRS 18 on 26 December 2024, so KSA reporters are firmly in scope for 2027.

What IFRS 18 Means for Banks and Insurers in Saudi Arabia and the GCC

Every IFRS 18 guide explains the five categories for a manufacturer. Almost none explain what happens when the entity is a Riyadh bank or a takaful operator, and that’s the case where the standard actually reshapes the headline numbers. Financial institutions aren’t an afterthought in IFRS 18. They’re the exception the standard was carefully written around.

If you need the base mechanics first, the pillar guide on what IFRS 18 changes covers the five categories and subtotals.

How Does the “Main Business Activity” Rule Work for a Bank?

For a corporate, interest income is investing and interest expense is financing. For a bank, both are the core business. IFRS 18 handles this through “specified main business activities”: if providing financing to customers is your main activity, interest income on customer loans and interest expense on the deposits funding them both sit in operating. Net interest income lands inside operating profit, where analysts expect to read it.

Regnology frames it cleanly for banks: matching interest income and expense in the operating category gives a cohesive presentation of net interest income within core operations. That’s not cosmetic. For a Saudi bank, NII is the profitability metric. IFRS 18 finally lets the audited operating profit line reflect it directly.

What About Insurers and Takaful Operators?

Insurers hit the second limb of the rule: investing in assets as a main business activity. Income and expenses from the financial assets backing insurance liabilities go to operating rather than investing. Two exclusions matter most for GCC insurers. Insurance finance income and expenses recognised in profit or loss under IFRS 17 stay in operating, not financing. Income from issued investment contracts with participation features under IFRS 9 is treated the same way.

So a takaful operator already deep in IFRS 17 now layers IFRS 18 presentation on top. The measurement work you did for IFRS 17 stands. What changes is where those results land on the restructured face of the statement, and how they roll into operating profit.

Has SOCPA Endorsed IFRS 18 in Saudi Arabia?

Yes. SOCPA’s Accounting Standards Board adopted IFRS 18 on 26 December 2024, aligned to the 2027 effective date, with early adoption allowed. One local detail matters: SOCPA transferred the additional disclosures it previously bolted onto IAS 1 across to IFRS 18, after aligning them to the new standard’s paragraphs. So SOCPA-endorsed IFRS 18 carries the same Kingdom-specific disclosure overlay that KSA reporters already knew under IAS 1. You don’t lose those local requirements. They move.

The scale of this is already visible at the top of the market. Saudi Aramco has publicly noted it is assessing the impact of IFRS 18 ahead of the January 2027 date. When the Kingdom’s largest entity treats it as a material project, smaller SAMA-regulated banks and insurers shouldn’t treat it as a footnote.

What Do SAMA-Regulated Institutions Need to Watch?

Two things beyond the accounting. First, regulatory returns to SAMA often draw on income statement lines that IFRS 18 reclassifies, so mapping your restated categories to your prudential reporting needs a deliberate check. Second, multi-entity groups with international subsidiaries face inconsistent local endorsement timelines, one entity on SOCPA-endorsed IFRS 18, another in a jurisdiction still finalising its route. Your consolidation has to reconcile both.

IFRS 18 vs Regional Practice: Where GCC Institutions Get Caught

The trap isn’t the standard text. It’s the assumption that a generic IFRS 18 readiness plan works for a financial institution. It doesn’t. A corporate template pushes interest into investing and financing. Apply that to a bank and you’ve misstated operating profit and buried net interest income where no analyst will look for it. The main-business-activity assessment has to come first, entity by entity, before a single line is mapped.

That assessment is judgment, not a formula. IFRS 18 deliberately doesn’t define “main” activity, leaving entities to weigh evidence. For a diversified GCC group with a bank, an insurer, and an industrial arm under one holding company, that judgment gets made three different ways inside the same consolidation.

Start With the Assessment, Not the Template

For a GCC bank or insurer, the sequence is fixed. Run the main-business-activity assessment first. Then map your income and expenses, respecting the IFRS 17 and IFRS 9 exclusions. Reconcile to your SAMA returns and your SOCPA disclosure overlay. Then build your MPM note. Skip the first step and everything downstream inherits the error.

This is the work generic guides skip and where Prima’s dual actuarial-and-IFRS bench matters. See our regional roadmap in the GCC IFRS updates for 2026. See our guide to IFRS 18 transition challenges for the sequencing, and how our IFRS 18 implementation services in the GCC handle financial institutions specifically.

Frequently Asked Questions